Identificación de las áreas relevantes, variables y objetivos

1.0 Introduction 2.0 Objectives 3.0 Main Content

3.1 Classical Political Economy 3.2 Marxian Political Economy 3.3 Neo-Classical Political Economy 4.0 Conclusion

5.0 Summary

6.0 Tutor-Marked Assignment 7.0 References/Further Reading

1.0 INTRODUCTION

This unit examines the three contending perspectives to understanding the logics of political economy. These perspectives include Classical, Marxian and Neo-classical perspectives. It highlights the main argument of each perspective as well as its limitations. It is expected that the student will understand and assimilate the kernel of each viewpoint, as this will significantly aid his or her appreciation of the dynamics associated with the course.

2.0 OBJECTIVES

By the end of this unit, you will be able to:

 explain the concept of classical political economy

 highlight Marxian political economy

 discuss neo-classical political economy.

3.0 MAIN CONTENT

3.1 Classical Political Economy

This is concerned mainly with the removal of inhibitions to the expansion of capital in the productive process. Intellectual precursors of the classical political economy include Adam Smith, David Richardo, among others. Whereas Adam Smith’s Wealth of Nations explains the principle behind division of labour and emphasises a free market

economy, David Richardo first stated the modern concept of comparative advantage.

The main argument is that the market forces of demand and supply should be the major determinants of the production process. Here, the intervention of the government in economic activities is rejected.

Rather, the state should focus on its primary function of maintaining law and order. Classical political economy has otherwise been referred to as laissez faire political economy because of its emphasis on free enterprise. Oatley (2019) attributed the activities of the classical political economy to the nineteenth-century liberal system. He posits that “governments eliminated trade barriers and made little effort to manage domestic economic activity” (Oatley, 2019:47).

The classical approach to political economy argues against the utility of restriction in international trade. It advocates for the abolition of trade restriction such as import and export duties embargo. It extols policies initiatives, which favours deregulation, privatisation and commercialisation. The western notion of globalisation, which places emphasis on trade and financial liberalisation, falls within this category.

This school principally contends that the price mechanism contains powerful equilibrating forces that will keep the economy near full employment without any government intervention; consequently, there is little involuntary unemployment (Samuelson and Nordhaus 2002:

664).

3.2 Marxian Political Economy

Scholars of Marxian orientation such as Karl Marx, Frederich Engels, V. I. Lenin conceive the classical orientation to political economy as vulgar: According to Frieden, Lake and Broz (2017:8) “Marxism originated with the writings of Karl Marx, a nineteenth-century political economist and perhaps the severest critic of capitalism and its Liberal supporters.”Karl Marx as the main proponent of the approach assumed a radical posture in his interpretation of the economic process. The Marxian interpretation of history emphasises social classes, productive forces and the social relationship of production. He maintains that the economy is the substructure upon which the superstructure revolves.

The superstructure includes politics, religion, justice, culture, among others. To Marx, the economic factor is the foundation upon which the socio-cultural and political superstructure is built. Using his logic of historical determinism and dialectical materialism, Marx and Engels (1848) established the evidence of antagonistic contradiction in every

economic epoch from slavery to capitalism and as such the existence of class struggle in each epoch.

The centerpiece of Marx work is an incisive analysis of the strengths and weaknesses of capitalism. Marx argued that all commodity value is determined by labour content- both the direct labour and indirect labour embodied in capital equipment. For example, the value of a shirt comes from the efforts of textile workers put together plus the value of the person who made the looms. By imputing all the values of output to labour, Marx attempted to show that profits- the part of the output that is produced by workers but received by capitalists- amount to unearned income. It is the opinion of Marx that the injustice of capitalist receiving unearned income justifies transferring the ownership of factories and other means of production from capitalists to workers.

The Marxian approach is consistent with the socialist worldview, which accommodates extensive state intervention and control of the economy of the nation. It is the expectation of scholars of Marxian orientation that state monopoly of the production process will make for a better redistribution of income in the society.

3.3 Neo-Classical Political Economy

This perspective gained prominence with the writings of John Keynes.

This school of thought doubt the capability of attaining optimum resource production and allocation within the classical assumption.

They are also opposed to the extremism of the Marxian scholars. For them, there is a need for some limited measure of state intervention in the economic process if there must be full economic production.

Scholars in this school were predominantly influenced by the economic crisis of the prewar period and were determined to avoid the economic chaos and competitive devaluations that had occurred during the Great Depression. They believed that the gold standard was too inflexible and served to deepen and lengthen business cycles.

It is their position that changes in aggregate demand have a significant and lasting effect on output. Hence, if aggregate demand falls because of a monetary tightening or a falloff in consumer spending, Keynesian scholars hold that this will in the short run lead to falling output and employment (Samuelson and Nordhaus, 2002: 664). Consequently, they posit that state intervention in the economic process is relevant for the attainment of full employment, control of inflation and general economic recession. In summary, they postulate that government intervention was needed to control the flow of money in the economy

and further accommodate the preference of government’s fiscal and monetary policies to national economic development. The neo-classical perspective gained popular sympathy with the crisis of world capitalism associated with the Great Depression of the late 1920s and 1930 in the global capitalist system.

SELF-ASSESSMENT EXERCISE

The perspective of the political economy that doubted the capability of attaining optimum resource production and allocation within the classical assumption is called.

(a) Marxian political economy (b) classical political economy (c) neo-classical political economy (d) radical political economy

4.0 CONCLUSION

The above discussion focused on the contending polemic on the role of state in the functioning of the economy. There exist a remarkable discrepancy between the Classical, Marxian and Neoclassical perspectives to political economy. However, despite the observable variations in orientation, one underlying motivation for each of the perspectives is that they are driven by the quest for a more effective way of delivering public goods.

Consequently, whereas the classical perspective frees the state from all encumbrances associated with state participation in the economic process, the Marxian perspective emphasises effective state intervention in the economic process. The Neo-classical approach on the other hand, is a midstream between the Marxian and classical orientations.

5.0 SUMMARY

The role of the government in the economic life of the state cannot be overemphasised. The perspectives discussed in this unit are important in properly understanding the state. The classical liberal theory talked about the prevalence of market forces. This was opposed by the Marxian school of thought, which as it were asserts that the state exists to perpetuate class division and the continual exploitation of the proletariat. The neoclassical model championed by J. M. Keynes proposes some level of state intervention in the economy as a way of controlling the flow of money.

6.0 TUTOR-MARKED ASSIGNMENT

1. The perspective of political economy that emphasises a free market economy is called. (a) Mercantilist Perspective (b) Marxist Perspective (c) Rational Perspective (d) Classical Perspective.

2. Marxian orientation conceive the classical orientation to political economy as __ (a) Volatile (b) Valuable (c) Vulgar (d) Visionary

7.0 REFERENCES/FURTHER READING

Frieden, A. J., Lake, A. D. & Broz, L. J. (2017). International political economy: Perspectives on global power and wealth. New York

& London: W. W. Norton & Company.

Oatley, T. (2019). International political economy. New York &

London: Routledge. Available at

www.routledge.com/9781138490741.

Samuelson, P. and Nordhaus, D.W. (2002). Economics. New Delhi:

Tata McGraw Hill.

UNIT 4 BASIC CONCEPTS IN POLITICAL ECONOMY

1.0 Introduction 2.0 Objective 3.0 Main Content

3.1 Basic Concepts in Political Economy 4.0 Conclusion

5.0 Summary

6.0 Tutor-Marked Assignment 7.0 Reference/Further Reading

1.0 INTRODUCTION

In this unit, the student is also exposed to the basic concepts associated with political economy. A good understanding of these concepts is important at this early stage, as they will be continually utilised throughout the entire course. The onus lies on the student to appreciate and assimilate the meaning of these concepts and apply them frequently in the course of daily interactions. Prominent among them include labour, social class, means of production, socio-economic formation, bourgeoisie and proletariat and so on.

2.0 OBJECTIVES

By the end of this unit, you will be able to:

 explain the basic concepts in this course.

 mention the contemporary reality of those concepts.

3.0 MAIN CONTENT

3.1 Basic Concepts in Political Economy

This is conscious and purposeful activity of people to produce material wealth. In the labour process, people act on nature to adapt it to their own requirements. Labour is eternal to humankind and can be skilled or unskilled. For Friedrich Engels, labour is an external, natural necessity and the primary condition for human life. Lenin shared this view and add that it was labour that created man himself.

The fundamental difference between man and animals appeared when man began to make tools, even the primitive ones. As soon as the simplest tools were made, the need arose for contact between primitive people in the labour process concerning the application of these tools.

The management of these tools or instruments of labour led to the development of human society.

Means or Instruments of Labour

This refers to the instrument of labour that man uses that determines the force of his impact on nature. It includes tools and machinery, as well as buildings and land used for production purposes and infrastructure like roads and communications networks and so forth. In primitive communal society, for instance, people used sticks and stones as instruments of labour, so they were usually powerless before nature. Today man works with the help of many machines and his domination over nature has grown immeasurably. It is a generally accepted verdict that the level of development of instruments of labour serves as a measure of man’s domination over the environment. Marx points out that it is not articles made, but how they are made and by what instrument, that enable us to distinguish different economic epochs.

The contemporary replacement of a traditionally human-operated process by a mechanised or computerised one breeds some amount of fear and uncertainty. But this is what industralisation has done. Robots are increasingly becoming the instruments of labour, hence increasing the rate at which human influence over the environment is rapidly waning.

Objects of Labour

People use instruments of labour to act on objects of labour i.e. on everything to which man’s labour is applied. Man founds objects of labour in the environment, in nature itself. All the primary objects of labour - minerals, animals and plants, the wealth of the water are found in nature. The objects of labour that have already experienced the impact of human labour but require further processing are called raw materials. With the help of means of labour, in his labour activities, man adapts the objects of labour to his requirements, the result of this process being the product of labour.

Means of Production

Means of labour and objects of labour together constitute the means of production. These means of production cannot on their own produce any material wealth. The most sophisticated technology is worthless without people. As such, human labour constitutes the decisive factor of the production process. It is also called the Productive Force i.e. means of production created by society, especially instruments of labour, and the people producing material wealth. This ensures the development of the productive forces and the production of material wealth in adequate quantities.

Relations of Production

The relationship between people in the process of production, exchange, distribution and the consumption of material wealth are called relations of production or economic relation. These are usually property relations connected with the nature of the ownership of the means of production and products. Relations of production can either be relations of cooperation and mutual assistance between people free from exploitation, or relations of exploitation of man by man. The relation of production in a capitalist society either exist between members of the same social class like proletariat to proletariat or bourgeoisie to bourgeoisie on the one hand; or between members of differing and antagonistic social classes as between the bourgeoisie and proletariat.

Mode of Production

The productive forces (means of production) and relations of production constitute the mode of production. These two interact and influence each other, and both develop in the course of the historical development of society. The mode of production is also called Epoch or Era in the Marxian dialectics.

The productive forces are the more mobile component of the mode of production. They are always changing, for people are constantly improving the instrument of labour and accumulating diverse experiences in the process of production. A specific level of development of the productive forces requires corresponding relations of production. This is the economic law discovered by Marx. This relates the relations of production to the character and level of development of the productive forces. This law reveals the economic basis of social relations.

Basis of Society

This is otherwise called the economic system, that is, the totality of socio-production relation at each given stage in the historical development of society. It is the relations connected with a specific level of development of the productive forces. The basis of society can be antagonistic or non-antagonistic. The basis of slave, feudal and capitalist societies are antagonistic, since they are based on private ownership of the means of production, relation of domination or subordination and exploitation of man-by-man. The basis of the primitive – communal and socialist societies are non-antagonistic, for this society is based on communal and public ownership of the means of production in the absence of exploitation.

Superstructure

The basis of society engenders a corresponding superstructure and determines its development. The superstructure consists of the political, philosophical, legal, artistic, religious and other views of society and corresponding institutions. In a class society, the superstructure has a class character. The dominant class creates institutions to protect its class interests, following its views. The basis of society and the superstructure exist only for a specific period. Consequently, the basis of society changes elicits a change in the superstructure of society. For instance, the replacement of the feudal basis with the capitalist one also entails a replacement of the feudal superstructure with a capitalist one.

Socio-Economic Formation

The mode of production of the material wealth, being a unity of the productive forces and the relations of production together with the corresponding superstructure, constitutes the socio-economic formation.

Karl Marx and Frederich Engels in the Manifesto of the Communist Party identified five different socio-economic formations in the history of mankind. These are primitive communalism, slave-owning, feudalism, capitalism and communism. The first phase of communism is socialism. Each of these has had its own corresponding economy, views, ideas and institutions. The development of the socio-economic formations proceeds from the lowest to the highest. Thus feudalism made way for capitalism, and capitalism for socialism i.e. the first phase of communism.

Social Class

Karl Marx identifies a social class as a group of persons that share a similar relationship to the means of production. For him, each epoch or mode of production beginning from slavery to capitalism was characterised by the existence of social classes. Under slavery, the social classes were slaves and slave masters; Feudalism was characterised by lords and serfs while capitalism had bourgeois and proletariats. These social classes co-existed in a situation of stratified imbalance in status and wealth, with the dominant class extorting the

‘surplus value’ of the subordinate. As such, these social classes are locked in antagonistic contradictions over the allocation of social surplus.

For Max Weber, a social class consists of persons who share a similar relationship in the market place (Colson, 2013). This description is somewhat consistent with the Marxian economic stratification. Weber however disagrees with Marx on the process of social mobility. This is because whereas Marx posits that it is only through a revolution that the proletariat can rise to ascendancy, Weber advocates that the worker can attain upwards mobility through hard work and promotions in the factory.

The Bourgeoisie

This refers to the owners of the means of production, that is, the propertied class in a capitalist society. In the Marxian tradition, under capitalism, the bourgeoisie exploits the workers by expropriating the surplus value from their labour.

The Proletariat

This refers to the exploited workers who own no means of production but only have their labour to offer to the process of production. Marx asserts that while the proletariats who carry out the actual process of production are living in penury, misery or abject poverty, the bourgeoisie who only invest in the productive capital and not labour are living in affluence and splendors, the source of their wealth being in the surplus value, which they extort from the proletariats. This perpetuates the irreconcilability of their contradiction.

Surplus Value

Otherwise known as social surplus is the difference between what the proletariat produces and what he actually takes home in the form of his wage. Marx (1867) maintains that the struggle over the possession of the surplus-value is the source of an antagonistic contradiction between the bourgeoisie and the proletariat in a capitalist society. This class struggle for him will result in a proletarian revolution and that the subsequent proletarian victory will lead to the ascendancy of socialism and eventually communism.

Capital

Bourgeois economists apply the terms “capital” to all instruments of labour, from primitive man’s sticks and stones. One bourgeois author said that “in the first stone which he (the savage) flings at the wild animal he pursues, in the first stick that he seizes to strike down the fruits which hang above his reach, we see the appropriation of one article to aid in the acquisition of another, and thus discover the origin of capital”.

However, the Marxist contends that means of production are not in themselves capital: they are a necessary condition for the existence of any society and, in this sense; classes make no difference to them.

Means of production only becomes capital when they are the private property of capitalists and are used for exploitation of the working class (proletariat). Here, capital is not a sum of money or means of production as liberal economist suggests, but a historically determined socio-production relation under which the instruments and means of production, as well as the chief means of subsistence, are the property of the capitalist class. The working class, which is the chief productive force of society, is deprived of means of production and means of subsistence, so it has to sell its labour power to the capitalist and suffer exploitation. What then is Capital? Simply, it is the value that, through the exploitation of wage workers, begets surplus value.

Class Struggle

This implies the antagonistic competition between the opposing classes in any epoch. It emerges from the struggle to appropriate a major share of the surplus that is accumulated from the process of production. Marx and Engels (1848) noted that the history of all the hitherto existing society is the history of class struggle. Karl Marx observed that class